Senate proposes bipartisan housing relief bill

Published 8:00 pm, Wednesday, April 2, 2008

Senate leaders late Wednesday unveiled bipartisan legislation that would provide funds for mortgage counseling, tax incentives for home buyers willing to purchase a foreclosed or newly built home and aid to states struggling with rising foreclosure rates.

"We helped Wall Street, we're all glad Bear Stearns was taken care of, but now it's our turn take care of people on Main Street," Senate Majority Leader Harry Reid, D-Nev., said Wednesday evening on the Senate floor.

The Foreclosure Prevention Act is a follow-up to February's economic stimulus plan, which is intended to spark the sagging economy. Wednesday's compromise bill targets the troubled housing sector, which is at the heart of the nation's economic problems. The compromise offers some important advances, but some economists argue that it falls far short of what's needed.

"Anything that helps on affordability is going to provide some assistance," said Brian Bethune, U.S. economist for Global Insight, a forecaster in Lexington, Mass. "The question is whether they are trying to dig out the ocean with a teaspoon."

The compromise plan would provide almost $11 billion in tax breaks to homeowners, lenders and homebuilders. It was reached after the Senate majority and minority leaders and the top Democrat and Republican on the Banking Committee agreed on a core set of principles. When they couldn't agree, they set in place a procedure for voting on the more controversial proposals as amendments.

"Getting to this point has required compromise by all sides. This is a solid, bipartisan start to keeping families facing foreclosure in their homes, helping other families avoid foreclosures in the future, and helping communities already harmed by foreclosure to recover," said Reid and Minority Leader Mitch McConnell, R-Ky., in a joint statement.

Over the next several days, senators will debate both the core plan and more controversial amendments, such as a Democratic plan to give judges the power to change the terms of a mortgage when a homeowner has filed for bankruptcy.